There’s good reason that giants like Walmart and Home Depot work with the Vendor Managed Inventory model. This type of supply chain arrangement makes a lot of sense for both parties and creates a symbiosis which keeps needed supplies and goods on hand, without overstocking.
This type of supply relationship allows information to be shared electronically between the buyer and the vendor. The data obtained through mutually accessible software solutions allows inventory needs to be forecast, using statistical analytics.
You know that if the big boxes are using this method of procurement for at least some of their operations that there must be something to it, so let’s take a closer look.
More information. Faster.
One of VMI’s most attractive features is undoubtedly the facility it offers for sharing more information, faster. It’s in the flow of information and the way it’s deployed that the secret of this methodology lies.
By aligning business objectives and streamlining supply chains, every facet of operations on both ends of the arrangement benefit. Inventory is less likely to languish, service is drastically improved and sales are increased.
It’s in the flow of information that all these ends are achieved.
Key information flows between vendor and buyer, allowing for precise calculations to be made concerning inventory. Coupled with monitoring and reporting, the supply chain is refined because needs are accurately identified.
Information makes the wheels go around
Beginning with the provision of a Product Activity Report from the buyer, the vendor is given access to key information on transfers and sales, as well as what’s on hand, what’s in the pipeline and what’s scheduled to be there next.
From this information, VMI software determines timelines for restocking. Information about the product’s position in the chain is constantly monitored to ensure that the information reflects all factors, including exceptions. Then, a purchase order is issued to the supplier. Next, the PO is acknowledged by the buyer.
Total supply chain transparency
Besides all that ultra-useful and revelatory information, VMI provides a level of transparency that serves everyone exceptionally well.
Information is reported to both vendor and buyer and is always available on demand. Mutually agreed upon measurements against stated objectives like turnover, in-stock data and transaction costs are monitored and reported on, ensuring that everyone’s on the same page – streamlining the supply chain and creating a value center in procurement.
Is VMI for you?
Vendor Managed Inventory is a deceptively simple methodology, but you need to have all the components required to make it work for you at its most dazzlingly effective.
CenterPoint is a trusted procurement advisor with 15 years’ experience bringing quality procurement solutions to companies like yours. Our experts are seasoned procurement professionals who have served 20% of the Fortune 500 over the past decade.
We leverage $850 million of indirect collective spend to save you money on your daily business needs. We do it with the power of numbers, keen data analysis, and focused account management that deploys data to get you what you need.
Is VMI for you? Contact us. Let’s find out!